The government is set to name the winners for a highly competitive tender for offshore oil and gas exploration blocks this month.

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By William Boot 7 February 2014

New discoveries of natural gas or oil will not be exported until Burma’s own domestic demand is satisfied, a senior planner in the Ministry of Energy has disclosed.

Confirmation of the decision comes as the ministry is set to name this month the winners of a major international auction for 30 offshore exploration licenses in Burmese waters.

“The government decided [that only] after fulfilling the domestic sector we will export,” the deputy director-general of the ministry’s planning department, Win Maw, told industry analysts Platts in Tokyo while attending an oil industry conference.

At present more than 80 percent of the gas produced by three major offshore fields—the Yadana, Yetagun and Shwe—are piped out of Burma to Thailand or China.

The same fate awaits most of the gas soon to be pumped out of the Zawtika field in the Gulf of Martaban under the terms of a license held by the Thai state-owned oil firm PTTEP, said Win Maw. According to Offshore Technology magazine, the field, could this month start producing 300 million cubic feet of gas per day.

At the same time, the government is considering plans to import expensive liquid natural gas (LNG) to meet rising domestic demand, especially for electricity generation.

Production at the Shwe field, for which the China National Petroleum Corporation built a pipeline through Burma into China’s Yunnan Province, is building up to reach over 510,000 million cubic feet per day by the first quarter of 2015, Win Maw said, according to Platts.

Licenses for 30 new offshore blocks will be awarded to winning bidders this month, he said.

The bidding process by about 30 major international and local oil firms has been in progress since last the middle of last year.

“We are nearly at 100% evaluations of the 2013 offshore bidding round and will announce results in February,” the deputy director general of planning at the ministry, Win Maw, told Platts.

Firms who placed bids include Shell, which has bid for three blocks in partnership with Mitsui Oil of Japan; ConocoPhillips of the US partnering with Norway’s Statoil in two bids; Chevron; ExxonMobil and Total. Asian bidders include PTTEP, Petronas of Malaysia and OVL of India.

However, it could be many months more before any actual production sharing contracts (PSC) are finalized with the bid winners.

Licenses for 16 onshore blocks were announced last October but it will be up to another three months before any PSCs are signed, Platts said.

Burma’s domestic demand for oil and gas will take priority in all production from the new onshore and offshore contracts, said Win Maw
“The government decided only after fulfilling the domestic sector [needs] we will export,” he said.

The ministry is preparing for another new round of offshore block licenses and these might be put up for bidding later this year depending on the progress in settling the current bids.

Details of these might be announced at the Myanmar Oil & Gas Week in Yangon on 25th to 27th February, regional energy analyst Collin Reynolds in Bangkok told The Irrawaddy this week.

“The international companies who have placed bids for the first round of 30 offshore blocks will have been aware of possible export restrictions on any new discoveries,” Reynolds said.

“What they will be betting on is that discoveries will be so large Burma won’t have need for it all and so it can go into export markets.

“In the short term demand in Burma for gas and oil will exceed domestic supply and we are hearing that the Ministry of Energy might have to import gas, which will be expensive.”

In fact, the Ministry of Electric Power is negotiating with ten companies for a deal to build an LNG importation terminal.

“Hydropower generation has been a main power source in [Burma]. We now have plans to import LNG and expand it by introducing gas-fired turbines in response to power shortages,” Win Maw was quoted by Platts in Tokyo as saying.

“The official [Win Maw] said a feasibility study is underway and that more than 10 companies have submitted import terminal proposals, ranging from floating LNG facilities to traditional onshore regasification terminals,” said Platts.

The Ministry of Energy is also planning “very soon” to invite foreign bidders for a contract to build a new oil refinery with a processing capacity of 56,000 barrels per day, said Platts. This is more than the current capacity of the country’s three existing old refineries.

The new refinery is being considered for a greenfield site in central Burma on the west bank of the Irrawaddy River, said Platts.